A client recently visited upset about what happened when her ex-husband died. She felt his final wishes caused serious problems in the family, including making her relationship with one of her children very difficult.
What did he do? First, he made all his assets paid on death or transferred on death to his children, equally. While that avoided probate, there was no money to pay for his funeral, prepare his final income taxes, or pay any other bills or expenses. While he probably thought that his children would get along and pay his final expenses, one of his children adamantly refused to pay any of his final expenses from her own assets, including the money she was receiving as a beneficiary of her father’s accounts. Second, he named both children as power of attorney and executors. When they could not agree on decisions, it caused tremendous stress amongst the children, and today no longer speak to each other.
These are lessons we tell all clients. Paid on death (POD) and transfer on death (TOD) are simple tools to avoid probate, but these tools can cause unintentional problems. If the goal is to avoid probate, clients should use a fully funded revocable living trust. This avoids any potential problems that could be caused by POD and TOD and is just as easy and effective.
Also, two people acting as executors or power of attorney normally causes delays and potential problems. If a client is worried that his or her client will be unfair or unethical, then the client should appoint a third party to be in charge. Two people in charge can only cause problems, delays, and bad feelings.
Careful and thoughtful planning is essential for ensuring your children will continue to like each other after your death. Using simple tools like POD or TOD can work, but when they do not work, it can cause significant fees and dissension, which can be avoided by estate planning that avoids potential problems and pitfalls.
Contact the attorneys at Altman & Associates should you have questions on titling accounts at 301 468 3220 or schedule a consultation with us here.
